tom hopkinson

One of our expert bloggers, Tom Hopkinson, analyses the impact of the eagerly awaited ‘Renewable Energy Roadmap’ and Electricity Market Reform (EMR) White paper published by the UK government last week.

As someone who specializes in recruitment for the green energy sector, and is closely involved in a number of government backed think tanks and skills planning groups, I was waiting with keen anticipation for the Government’s ‘Renewable Energy Roadmap’ and Electricity Market Reform (EMR) White paper, published on Tuesday 12 July.

As Renewable UK quickly pointed out in their recent statement ‘road map points in the right direction’ the industry welcomes the Government’s announcement of a massive offshore wind expansion, and that many of the industry’s primary ‘concerns’ had been addressed in the EMR white paper.

The Secretary of State for Energy and Climate Change Chris Huhne’s call for up to 18GW of offshore wind capacity to be built by 2020 – up from 13GW in 2009’s Renewable Energy Strategy – will, as pointed out by Renewable UK, provide a massive boost to the sector by ‘increasing investor confidence and allowing the sector to expand more rapidly.’

Renewable UK has also commended the Secretary of State’s decision to set up a working group to examine ways to drive down costs, and that the marginal added cost of rolling out renewable and low carbon technologies will be greatly outweighed by the benefits of greater price stability and increased employment to name a few.

I could not agree more and have always believed the bigger, longer term picture of economic stimulus and job creation far outweighs short term concerns about increasing costs and waning consumer confidence – one could argue the latter is nothing more than political paranoia.

With regards to the EMR white paper, the core subject of this piece, I would agree with Renewable UK that there has been much progress towards creating a stable electricity market that is good for business and good for the people of Britain.

But I also have a number of concerns. For example, how is the government going to ensure we develop a UK based engineering supply chain competitive enough to justify preferred supplier arrangements, such as between project owner Iberdrola and turbine supplier Gamesa in Spain, without it looking like protectionism?

The industry cannot afford the inefficiencies of protectionism and the EU will not allow it. Add to this the ‘embarrassing’ position of a domestic wind energy supply chain and labour market which is way behind the competition. Instead, the government must encourage UK GDP growth to be realized through provision of conditions that encourage, or even better, insist on joint ventures between UK suppliers and manufacturers and those overseas-based organisations that will benefit from this massive offshore wind expansion.

We must look to develop an open, competitive market where domestic manufacturers such as David Brown Gears can become major players, and develop an investment environment for manufacturing that will allow FTSE listed UK companies such as GKN, Rolls Royce and Weir Group to flourish. These domestic manufacturing hubs with their supportive, far reaching supply chains will create stable, long term growth for the sector and ensure job and wealth creation is kept in the UK.

Another question to ask is do we have the time to create a competitive, domestic manufacturing base? If we are to meet the timeframes described in the white paper, I believe the government need to take a firmer hand and dictate the flow of resources, rather than rely solely on ‘market forces’ to deliver.

Currently we are dealing with long term aims on short term time scales and this requires a greater degree of direction from Government. For example we will achieve more progress by backing a smaller number of technologies, an approach which makes the achievement of these short term goals more realistic. Effectively waiting for the market to select which technologies will prevail could take too long with the risk of investing scare finance and skills in areas that may not make the energy mix.

On the subject of skills development there are many questions left unanswered in the white paper. We must look at how we create the skill sets required to drive the sector forward. For example, how do we encourage more cross skilling? How do we fund training and education and where should the focus lie? These questions will be core to the growth of a successful, competitive domestic market not to mention the development of a ‘knowledge economy’ that can be exported abroad.

The problem we have today is there is a finite pool of relevant skills and talent in the UK – in fact the sector is already suffering skills shortages across the board. We need to up the ante on various fronts. There needs to be more cross skilling from relevant sectors, increased investment in apprenticeship schemes (Carnegie College) and we must continue to develop partnerships between industry and education providers, such as the innovative, forward thinking work Strathclyde is doing with the energy sector via their new Technology Innovation Centre.

These partnerships are a critical means of developing relevant skill sets through apprenticeship schemes, the development of bespoke courses and training modules, as well as a valuable resource for research into new products, materials and technology. But there are only a handful of industry/ education partnerships in the UK and the government needs to encourage and set the right fiscal climate for these enterprises to flourish.

There is also much emphasis on the need for more efficient use of existing electricity supplies via smart grid technology, as well as reducing demand as a more cost effective solution to building more generating capacity.

What is not mentioned in the huge potential these energy efficiency ‘schemes’ have in terms of employment and economic generation. In fact one could argue that ‘efficiency’ is an industry of its own. R&D into new energy saving technologies, the manufacturer of smart metres, and the associated installation and maintenance work creates a supply chain of its own, and will produce a range of employment opportunities.

The government could certainly help to stimulate such an industry via legislation, incentives and investment, points that I hope to see included in the next review. For example the development of new smart grid innovations requires more support via research grants, and more time and investment into forging links between research centres and industry. Making smart meters compulsory in all domestic and commercial premises within the next five years would go some way to achieving this.

The Government also rightly points out some of the barriers to entry and growth in electricity generation and supply markets focusing on the low level of liquidity in the electricity wholesale market. I believe that supporting the creation of new jobs, protecting existing jobs and helping independent companies to offer competitive salaries and packages is also essential for creating increased liquidity in the market.

Finally, the white paper makes the valid point that we need to achieve ‘pan-european collusion’ on electricity supply to ensure demand is always met by supply across Europe. I would add to this by saying that Government’s and industry associations also need to create a ‘pan-european’ skills base to encourage the free flow of talent and capability between borders. Through work permits and pan- european standards, workers and specialists need to be able to cross borders and be relevant and effective wherever they are, similar to the offshore oil and gas passport system.